UPI gamechanger for digital payments, but here is what will make even small merchants go cashless

While Unified Payments Interface (UPI) is a game-changer for digital payments, smartphone penetration will have to increase for the channel to be adopted by small merchants, Manju Agarwal, Deputy Managing Director for corporate strategy and new business, State Bank of India (SBI), tells in an interview. Digital transaction volumes may bounce back to their demonetisation levels during the festive season, she adds. Edited excerpts:

Q: How has FY18 been so far for digital transactions?

A: We saw a spike in digital transactions during demonetisation period for the simple reason that cash became very scarce. The entire industry went out of the way to deploy more and more PoS machines during those four-five months. We were doing, on an average, 3.57 lakh transactions a day prior to demonetisation and on December 31, we did 20 lakh transactions. Over the demonetisation period, on an average, we were doing 1.5-1.6 million transactions.

In January, February and March, we saw a little dip and clocked around 1.1 million only. We are seeing a rise again. I would not say it is a spurt; it is a steady and slow rise. Dussehra onwards, the hits on PoS (point-of-sale machines) generally go up as do the hits on e-commerce sites. So, I am hopeful that this festive season we will see the same numbers that we saw during demonetisation, which is 1.5-1.6 million (transactions) on our PoS machines. If I look at the total number of transactions on our debit cards, it is likely to go up to 3.5-3.7 million from 2.7 million at present. Actually, demonetisation has pushed us ahead by about three or four years.

Q: What will it take to enable Unified Payments Interface (UPI) transactions at small merchants?

A: With its many benefits, UPI is set to become a game changer. It is possible to acquire merchants on UPI and I need not give them a PoS, which involves an installation cost and also operating costs related to paper rolls and third parties who will service the machines. For UPI, the merchant just needs a smartphone. But, the only challenge to UPI adoption that I see is that not everybody has a smartphone. The penetration of smartphones may take some time. It may have taken longer, but now you have a `1,500 phone, for which one million people have signed up. Assuming that this one million gets a smartphone over the next two to three years and prices are reduced by other companies as well, many more people can then be included in the UPI ecosystem. Once consumers take to UPI, merchants will follow.

Q: Card-based transactions constitute a chunk of digital transactions. Is that going to be the case in the days ahead, too?

A: We have eight million debit cards in the country and these have been in use for some years now. Consumers know how to swipe them because of their experience at ATMs and they do not have to be educated to pay through them, provided the merchant is ready with the PoS to accept payments. So it will be a good idea to on-board more merchants on PoS because you cannot assume that all these merchants can be on-boarded on UPI overnight and all these consumers will have smartphones and will be digitally enabled. Fifty percent of digital transactions by volume are still happening on cards and PoS and in value terms, the share would be 70-80 per cent. At least for another five to seven years, card and PoS transactions will be the dominant mode of digital transactions.

Q: Have you been acquiring merchants for Aadhaar Pay?

A: We have on-boarded almost 2.3 lakh merchants. This is more than the rest of the banking industry put together.

Q: Are you looking at integrating all four modes of payment on a single device?

A: We are working on a proof of concept for a single device on which you can do a card transaction, Aadhaar Pay, BharatQR and UPI transaction. Unless it is a single device and you make it easy for merchants to toggle between interfaces, it is only going to create more confusion for them.